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<title>Bill Wattenburg’s Background: The Gold Mine</title>
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<h1>The Gold Mine</h1>

<h2>(1985–1986)</h2>

<p>In our 1990 report, we had no information on Bill Wattenburg’s activities for 1985 and
1986. He declined to volunteer anything about this period during our two interviews with him in
1990. However, we picked up some information on this period during our 1992 interview with
him at his ranch in Plumas County, California. People in the town told us that he was working on,
of all things, a gold mine in 1985. They told us that this venture became the largest industry in
the area for the unemployed loggers and construction workers in Plumas County. We left one of
our staff in the area for a week to learn about this activity. The story we got suggests that
Wattenburg had an almost complete change of lifestyle for these two years, as well as a purpose
in what he was doing. He returned to the profession that he learned from his father when he was
young, that is, operating heavy construction equipment. He took on another strange challenge at
the same time.</p>

<p>The following individuals can confirm the events that we summarize below: Clifford Gibbs was the
general manager on the job for Sunbelt. Earl Arlin, was the Sunbelt chief engineer. James Moak and
Bill Pinkston were the job supervisors that Wattenburg hired. Attorney John Burghardt, of the law
firm of Marshall, Burghardt &amp; Kelleher, Chico, California, was Wattenburg’s attorney who set
up Wattenburg’s mining company called Wattexco and handled his later negotiations with Sunbelt
Mining Company.</p>

<br />
<p><b>Here is the story, with references to the individuals who confirmed it for us:</b></p>
<br />

<p>The logging and lumbering industry in Plumas County began to fade away in the early
eighties. Many skilled equipment operators and mechanics in the area were unemployed. Bill
Wattenburg’s classmates from high school and his father’s old friends were among them. They
had asked Bill Wattenburg to help them find some new industry for the town.</p>

<p>The Sunbelt Mining Company from New Mexico was planning to open a large gold mine
near Bill’s ranch. It was called the Calgom Mine. Sunbelt had discovered an
enormous body of low-grade gold ore under a mountain top at five thousand feet elevation. Sunbelt was going to
put the work of extracting and transporting the gold ore out to bid to several large mining
construction companies from Nevada and Utah. These companies typically brought in their own
employees and their own equipment for such jobs. The idle construction equipment owned by the
local people would not have been used by an outside mining contractor. The locals had no way
of bidding for the job because this required posting a $2,000,000 performance bond and
substantial operating capital that they did not have available.</p>

<p>They appealed to Bill Wattenburg to get the job for them somehow when he was vacationing
at his ranch in December 1984. Wattenburg studied the specifications for the job and
the manner in which the standard mining companies normally did such work. He concluded that
there was a much less expensive way to do the job using a lot of the surplus logging equipment in
the area. But, Sunbelt did not believe that this could be done.</p>

<p>Wattenburg made them an offer they couldn’t refuse. He agreed to a penalty clause in the
contract whereby he would pay Sunbelt for any loss of projected productivity based on the
estimates that Sunbelt had made for the progress that standard mining companies should achieve.
Furthermore, he would start the work immediately that winter (December 1984), whereas the
other mining companies would not start until the snow melted in the spring. Sunbelt agreed to let
him try it.</p>

<p>The rest appears to be typical Bill Wattenburg. Local workmen and supervisors at the
Calgom mine told us numerous stories of the unorthodox and “absolutely crazy” things that
Wattenburg organized with the local workmen and their equipment that winter.</p>

<p>Wattenburg used his own bulldozer and personally built a road to the top of the mountain
during the Christmas week of 1984. He then put out the call for all the locals who wanted to go to
work with their equipment, Several workmen told us that they all got a lecture when they first
arrived. Wattenburg told them that they had no damn business even trying to beat the big mining
companies at their own game. But if they wanted to try, he had a plan. He told
them, “Of course, if you don’t think it will work, you can always go back home where it is nice and warm
and slowly go bankrupt.” The workmen told us that everybody stayed.</p>

<p>The first task was to cut 2,000,000 tons of “overburden” dirt and rock off the top of the
mountain and move it a half mile away where it was dumped into a deep canyon. Overburden is
the dirt and rock on top of the ore body beneath it. The gold ore body was at a depth of a two-hundred
feet below the surface. Mining companies use very large off-highway trucks for this kind of
job where the dirt has to be moved some distance. They dig the dirt with enormous excavators
and load it into the trucks that haul it away. These machines typically cost $200,000 to $400,000 apiece.
The loggers had no such equipment. All they had were medium-sized bulldozers and small loaders.</p>

<p>They said that Wattenburg told them: “Well, if we can’t haul the damn dirt, I guess we’ll
just have to push it where we want it to go.” The problem was that a bulldozer is only good for
pushing dirt very short distances. The dirt falls away from the bulldozer blade if you try to push a
blade-full of dirt more than a few hundred feet. But Wattenburg showed them how to do it
anyway.</p>

<p>Here is how one seasoned operator described it: </p>

<blockquote>
<p>“He dug a big trench starting from the top and all the way down the side of the mountain to the canyon. This trench was about six feet
deep and just the width of a bulldozer blade. We stood around wondering what the hell he was
doing. We thought maybe he was going to run water down this trench to carry the dirt away.
But then he put maybe five or six of us on bulldozers to start pushing dirt on the mountain top
into this trench, up at the top of the trench. Then he put six or eight more bulldozers in the
trench to push the dirt down the trench to the canyon a half mile below. He lined them up one
right after the other in the trench. He had to teach a lot of us how to keep a load of dirt in front
of the bulldozer blade without loosing it all on the way down. You know, his daddy taught him
how to give you a shave with a bulldozer blade if you sit still. … When the dozers reached the
bottom, they just climbed out of the trench and went back up another road to get another load of
dirt at the top. We thought it would be tough trying to push dirt with a dozer down that trench
that far, but it was easy once you got the hang of it. Hell, in a couple of days we were moving
20,000 tons a day. That’s more than you can haul in trucks that cost three times as much to own
and operate. … Some of the guys had dozers that were so old and worn out that they could hardly
climb back up the mountain. It was pathetic. But Bill just told the others guys with new
equipment to give the old boys a push back up the mountain. The old dozers did just as good as
the new ones when they were pushing dirt down the hill. … Bill fired one guy with a new Cat
who was complaining about helping the others. He told this asshole that he could go back home
and wait by the fire for the bank to come and repossess his new bulldozer. … The guy should have
realized that Bill’s father always had to work with beat up old equipment. He never could afford
a new piece of equipment in his life.”</p>
</blockquote>

<p>The former Sunbelt chief engineer, Earl Arlin, told us that his bosses from Sunbelt
headquarters came out and saw what Wattenburg was doing and got unhappy as hell. He was
moving the dirt with loggers and cheap equipment for less than half the cost that Sunbelt had
estimated it would cost a mining company using regular loaders and big trucks. And they had
agreed to pay Wattenburg what they were going to pay the other contractors. Wattenburg and
the loggers were obviously making a killing.</p>

<p>Mr. Arlin remembers that the Sunbelt executives called Wattenburg into a meeting where
they tried to get him to modify their contract. Wattenburg asked them what they would be saying
if they had discovered that he was behind on schedule instead of ahead of schedule. Arlin says
that they just looked at him and smiled. They admitted that they would be fining him for lost
productivity. At that, Wattenburg told them that he appreciated honest men and he
would consider reducing the amount they were paying him because he was moving the dirt for much less than
even he thought was possible. He offered to reduce his payments by ten percent. They wanted
him to reduce it by twenty percent. They settled on a fifteen percent reduction. The Sunbelt
executives went home to New Mexico very happy. They told Wattenburg that he could have all
the work he wanted in the future. Mr. Arlin suggests that he knew something was wrong.
Contractors just don’t give up money. They usually sue you for more.</p>

<p>Mr. Arlin laughed as he told us: “By the next week, Wattenburg’s crazy crew was moving
30,000 tons a day down the mountain, not 20,000! Hell, they were now making more money than
they were before he gave Sunbelt back the fifteen percent reduction. Some of the
poor loggers were making more money in a week than they made all year when they were starving to death
working in the logging woods with their equipment.”</p>

<p>Wattenburg paid each of the loggers a percentage of the total income he received so that
the more dirt they moved the more money they made. One workman told us that most of them
were fighting over who could work two shifts a day. He said that he made as much as $1000
dollars a day. He was able to pay off the loan on his bulldozer in two months. He said they were
working in four feet of snow most of the time that winter, and yet they were as happy as a bunch
of kids playing at a ski resort.</p>

<p>Wattenburg’s job supervisors James Moak and Bill Pinkston told us that the one who was
having the most fun was Bill Wattenburg. “He couldn’t be on the job during the day because he
had to be at the university in Chico during the weekdays, but he came up and worked the
graveyard shift most nights. He loved to get on a big Cat and push dirt. Everybody else got their
asses in gear when he was there. The two daytime shifts had to go like hell to keep up with the
graveyard shift. Chico was only an hour away. Some of the equipment operators lived down
there. They would pick him up at 11pm and get him back to Chico in the morning by 9am. We
had our management meetings with him on weekends.”</p>

<p>Wattenburg’s crew finished the first phase of the job in April 1985. This was a month
earlier than the other companies could even have started. Apparently, his company, Wattexco,
made so much money that he was able to buy a new fleet of bulldozers and earth movers (called
scrappers) for the second phase of the job.</p>

<p>The second phase was to start digging the gold ore out of the enormous open pit they had
made at the top of mountain and then transport the ore to the processing plant two miles down
the mountain. His contract with Sunbelt included this work at a predetermined price which,
again, was based on what other mining contractors normally charged. Sunbelt was soon very
unhappy about this, according to those on the scene we talked to.</p>

<p>Supervisors Moak and Pinkston told us that Wattenburg again figured out a way to do
this next job for about half the estimated costs. Instead of using big trucks to haul the ore down
the mountain, he told them that they were going to use the rubber-tired Cat earthmovers
(scrappers) they already had. Wattenburg told them that this way they wouldn’t have to use
extra loaders to dig the ore and load big haul trucks—and they didn’t have to buy ten of the
$200,000 trucks either. He argued that the scrapers could load themselves with bulldozers
pushing them. Once they were loaded, they could go straight down the road to the plant. The
equipment operators protested that no one in his right mind would do this because these big
earthmovers are not designed to go long distances downhill with a load of fifty tons of dirt. They
don’t have enough brakes to keep from running away. Everyone told him it was suicide.</p>

<p>They said that Bill Wattenburg got on the first scrapper and showed them how to do it.
They recall that he made all the nervous scrapper operators walk alongside the loaded scrapper
and watch what he was doing as he slowly took it down the hill. An hour later, they were all
going down the mountain in their scrappers with fifty-ton loads.</p>

<p>Wattenburg’s scheme was something that no decent equipment operator would ever do.
He told them to drag their scrapper blades on the dirt road surface as they went down the
mountain. This would give them the braking power they needed. (The scrapper blade is what
digs the dirt up as a scrapper is being loaded.) Any operator would be fired on a normal
construction job if he ever let his scrapper blade dig into the road he was running over after he
was loaded. This would tear up the road as well as wear out the expensive steel cutting edge on
the scrapper blade.</p>

<p>But this wasn’t a normal job, Wattenburg told them. Supervisor Moak remembers that
Wattenburg told them: “I am the one who pays for the scrapper blades, and who cares about the
goddamn road! So you cut the surface level of the road down ten feet over the next year? So
what? I could have built that damn dirt road ten feet lower to begin with. When we’re through,
I’ll put it back where it was when we began. You guys just get your asses down that road with
all the ore you can haul, and I’ll worry about the rest.”</p>

<p>One of Wattenburg’s equipment mechanics told us that he hired two more unemployed
mechanics to work every night to replace the worn-out blades on the scrappers. He said that a
truck load of new scrapper blades worth about ten thousand dollars was delivered to the job each
week. “Normally, you wouldn’t use this many scrapper blades on a job in a year.”</p>

<p>The Sunbelt manager on the job, Mr.Gibbs, said that he soon figured out what
Wattenburg was doing. The ten thousand dollars worth of scrapper blades each week was only
about one-tenth of the cost of the only other alternative, that is, using conventional haul trucks to
do the job the way that mining contractors would do it. He realized that Wattenburg was making
a killing again. He was probably digging and hauling the ore for about 60 percent of the normal
cost of $1.40 per ton. There was at least 4,000,000 tons of ore to be hauled. Wattenburg was
being paid $1.50 per ton under his contract. That meant that he was going to make about sixty
cents a ton profit instead of the usual ten cents a ton. It wasn’t long before the Sunbelt executives
from headquarters in New Mexico wanted another meeting with Wattenburg.</p>

<p>Wattenburg agreed to a ten percent reduction in what they were paying him to deliver the
ore. But Wattenburg made them agree to give him the third phase of the job which was to build
the biggest part of the gold processing plant, the buildings and the laboratory. They gave him the
job on a time and materials basis plus ten percent profit because they had learned their lesson with
this guy and they figured that he already knew some way to do this job at a lot less cost. The
local Sunbelt building supervisor objected like hell because he had his own favorite contractor
from New Mexico already lined up to do the job, but the headquarters guys insisted that they had
just cut “a hell of a deal with Wattenburg that would save the company six hundred thousand
dollars.” Arlin told us:</p>

<blockquote>
<p>“I knew this guy Wattenburg had something up his sleeve again.”</p>

<p>“Sure enough, the next week the place looked like a flea market with all the characters
who showed up in beat-up old pickups with a hammer or a saw in their hands. Wattenburg hired
just about every unemployed carpenter and small building contractor in the county. He gave
them all a piece of the action and turned them loose. They had the damn buildings up in about
half of the time we expected. You know, this meant that he got paid for what the contractors
charged to do the job, plus he got a ten percent profit on top of that. But nobody in headquarters
complained. He got the job done for about ten percent less than we expected.</p>

<p>…</p>

<p>“Later one of our engineers sat down and figured out how much lumber we paid for on
that building job. It turned that we paid for about twice as much lumber as they used in the
finished buildings! Right then we realized that these hick contractors who built the buildings for
us probably were building something for themselves somewhere else at the same time. Where
else could that much lumber have gone?</p>

<p>“When we asked Wattenburg about this, he said: ‘I sure as hell don’t need to steal lumber.
But you corporate guys have got to realize that life is pretty rough for these people who have to
make a living up here nowadays. Most of their families never dreamed of having a home. What
are you bitching about? They saved you a lot of money, didn’t they?.’ We dropped the subject.”</p>
</blockquote>

<p>The Calgom Mine was in full operation by August 1985. They began producing
3,000 to 4,000 ounces of gold a month. Wattenburg was building one of the biggest fleets of dirt moving
equipment anywhere to deliver the ore from the mountain top to the processing plant. He bought
every used D9 Cat bulldozer and Cat 631C scrapper he could find on the west coast, according to
Mr. Al Pissetti, Dillingham Construction Co., Benicia, Ca., and Mr. Roger Ash
of Wershow, Ash and Lewis, Equipment Auctioneers of Los Angeles and Portland, Oregon.</p>

<p>Mr. Pissetti told us that Wattenburg once called him up in the summer of 1985 and
bought two of Dillingham’s used D9 bulldozers, sight unseen, for $50,000 apiece. But
Wattenburg wanted them delivered to the mine site the next day. Pissetti said he had never heard
of anything like that before. He said that Wattenburg told him on the phone: “I believe you
when you tell me that the bulldozers are in good shape. If you’re lying to me, you’ll find out who
I am quick enough.” Pissetti said that he called the bank and found out that Wattenburg had
already wired the money to the Dillingham account—and the banker told him who Wattenburg
was. He said he found some truckers to haul the bulldozers to Plumas County that afternoon.
(Our staff saw pictures in the bars and restaurants in the area in 1992 which showed
Wattenburg’s enormous fleet of equipment working at the open pit mine in 1985).</p>

<p>Wattenburg was employing 100 equipment operators by that time to run the equipment
around the clock, seven days a week. He even rented a restaurant to feed them. We were told
that the reason he did that was too encourage the operators to show up on time. Loggers and
construction workers are evidently notorious for having hangovers on Monday mornings. He
gave them free meals if they showed up on time before the shift started. If they were late, they
didn’t get any free meals for a week after that.</p>

<p>After the mine had been in full operation for only six months, Sunbelt Mining Company
executives decided that it would be to their advantage to buy out Wattenburg. He was making
more money than they were, and they owned the mine.</p>

<p>Wattenburg gave us permission to talk to his attorney, John Burghardt at the law firm of
Marshall, Burghardt, and Kelleher, Chico, California. Burghardt handled the final negotiations with Sunbelt for him. Burghardt told us that Sunbelt first said that they were
going to get another contractor who could deliver the ore at a lower price. Bill Wattenburg’s
answer was, “be my guest”. Evidently, Sunbelt couldn’t find another contractor at a lower price
than they were paying Wattenburg. Burghardt said that he then realized why Wattenburg had
earlier given them the reduction in price that he, Burghardt, had opposed. He said that
Wattenburg must have known that this would eventually happen and that no one else would be
able to do the job any cheaper. But Wattenburg was still making a good profit. By not being
too greedy, Wattenburg had put Sunbelt in a real bind.</p>

<p>They negotiated for several months. Wattenburg said that he just wanted to keep on
working because the job was providing employment to so many local workmen. Sunbelt
finally offered to keep most of Wattenburg’s employees if he would sell. Wattenburg agreed to a
deal whereby Sunbelt would buy his company, Wattexco, and as much of his equipment as they
needed to operate the mine, but it would have to be all cash.</p>

<p>Burghardt told us about the scene when he appeared with Wattenburg at the Sunbelt
office to sign the papers and collect the cashier’s check that Wattenburg had demanded:</p>

<blockquote>
<p>“The Sunbelt representative came with several lawyers and accountants in three piece
suits. Wattenburg was in his boots and greasy Levis. At the last minute, the Sunbelt boss
announced that they had thought it over and determined that Wattenburg’s equipment was not
worth what they had earlier agreed upon. He pushed a cashier’s check across the table to
Wattenburg. It was for $200,000 less than what it was supposed to be. But it was still more
money than I had ever seen. My heart started pounding. I nudged Wattenburg to take it, and let’s
get out of there before they change their minds completely. But, Wattenburg just
slid the cashier’s check back across the table and told them that if they were a little short of money, he
might be interested in buying out their interest in the mine. They had a meeting in the next
room for a while and finally came back with another check for the missing $200,000.
Wattenburg handed me the check, we shook hands with them, and he motioned for us to go.
There was no more conversation. That was it—It was all over.”</p>
</blockquote>

<p>Burghardt told us he was sweating when he left. Wattenburg said to him later:</p>

<blockquote>
<p>“Don’t feel bad about leaving without sticking around for small talk. Those Wall Street lawyers always
pull that bullshit of bringing two or more checks to a closing to see if they can get an anxious
seller to chicken out at the last minute and take less money. They figure most suckers are so
anxious to get a few million dollars cash in their hands that they will always take a few hundred
thousand less. That way they can go back to headquarters and brag about how much money they
saved the company. But when you call their bluff, they feel sort of stupid on the spot. It’s best
not to rub it in by sticking around too long. You might have to deal with them again someday.”</p>
</blockquote>

<p>Attorney Burghardt said that this was his trial-by-fire in corporate mergers. Burghardt
admitted that he didn’t realize what Wattenburg really knew about big business until after this was
all over. Much later he learned that “this guy in greasy Levis” had built and sold two high-tech
companies to the Wall Street crowd before he got in the dirt moving business. He said that he
later realized that Wattenburg had been playing a chess game with them all along, but that
Wattenburg was always about three moves ahead of them. “I was his attorney, but he never
really told me what he had up his sleeve.”</p>

<p>In terms of how much money Wattenburg made, Attorney Burghardt would only volunteer: “He did all right, but he didn’t walk away with what he could have by any means. He
got his capital back with a decent profit and he created thirty million dollars of business in the area
and a lot of jobs. I’m sure he could have made a lot more money doing other things for the time
he put in.”</p>

<p>Calgom Mine chief engineer Earl Arlin, now retired, was on the job every
day supervising the mining operation. He probably saw more of this story first-hand than anyone.
He was an engineer on major mining jobs for thirty years. His analysis of the scene may be the
best overall:</p>

<blockquote>
<p>“I knew who this fellow Wattenburg was. I listened to him on the radio for years. It
was always hard to believe that he was up there running a bulldozer or fixing a piece of broken-down equipment in the middle of the night. It was not
surprising what he did. I knew he wouldn’t do things in ordinary ways. I sort of felt sorry for my own company
every time they negotiated a contract with him.</p>

<p>…</p>

 <p>“He gave those old loggers their moment of glory and the chance to do one big job. I
 think he wanted them to know that they could be somebody … that they could do better than the
 big-city contractors with all their new equipment. … He was reliving his childhood. I don’t think it
 was just the money. I think he had been dreaming about going back and doing something like
 this in the construction business that would have made his father proud.</p>

<p>…</p>

<p>“When a man drives his new Mercedes up a dirt road with greasy tools in the back seat, he
is not there because he has to be. … We had calls coming into the office for him all the time from
important people in San Francisco and Hollywood and Washington. He wouldn’t come down off
the mountain to call them back, and he wouldn’t use the portable telephones we gave him
either. … He left a lot of his money on the table to take care of the people who worked with him. In the
deal he made with Sunbelt, they didn’t buy all of his equipment by any means. But he agreed to
leave some of his extra equipment on the job for us to use, I mean big bulldozers and scrappers.
He let us use that equipment for free so long as we employed some of his old-timers from
the area to operate the equipment. They had jobs for the next two years … some of those old
boys were running new bulldozers that they never before in their lives even dreamed of touching
All the next year, he would stop by the job whenever he was in town and just watch his old
crew working on the mountain. He’d climb on a Cat and do a little work while the crew was
having lunch or he’d give some suggestions to the mechanics working on a piece of equipment
that broke down. He never came in the office to tell us how we ought to be running the
operation.</p>

<p>…</p>

<p>“We had one real emergency in the winter of 1986. Heavy rains for two weeks almost
washed out our cyanide ponds. The mine would have been out of business if the cyanide had
washed into the river below. Wattenburg showed up with a truckload of big water pumps that
we hadn’t been able to rent from anybody because everybody in northern California was being
flooded. He stayed up there to help us day and night for almost a week. We asked him later
where he found the pumps we needed. He told us that Dillingham Construction Company, the
big contractor in Benicia, owed him a favor. He never sent us a bill.”</p>
</blockquote>

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